2015 (11) TMI 814 - AT - Customs

Company and Director Penalized for Fraudulent Export Practices

The Tribunal upheld penalties against a company and its director for fraudulent export practices and DEPB license misuse. However, the penalty imposed on ... Imposition of penalty - DTA clearances - Fraudulent availment of DEPB Credit - Held that:- There was a demand of duty of ₹ 201.50 crores and ₹ 1.05 crores confirmed against the said company alongwith interest and penalty of equal amount of duty. The appeal of the said Company was dismissed for non-compliance of the Stay Order. So, there is no need to go into the merits of the case on export of the goods as the appeals of the said Company was dismissed. The Adjudicating Authority observed that the entire operation of evasion of duty and obtaining of DEPB license was carried out at the instance and direction of Shri Liladhar of the said company as evident from the statement of Shri Dyaram S Rajde (Proprietor of Ashok Bulk Carriers), Shri Sanjay Ahuja (Export Executive of the said Company) and Shri Deepak S Joshi, (Customs Clerk of the said Company) as well as facts, which were specifically brought on record. - Company obtained DEPB license fraudulently and facilitated the various importers to import the goods duty free and imposition of penalty under Section 112 is justified. It is noted that the said Company exported the goods in irregular manner and penalty under 114 is warranted. It is further noted that the said company cleared the goods from DTA of SEZ in violation of the Central Excise Rules and imposition of penalty under Rule 26 is justified. - However, penalty on 1 appellant is set aside - Decided partly in favour of Appellant. Issues:Appeal against imposition of penalty under Customs Act 1962 and Central Excise Rules - Allegations of manipulation and irregularities in export of Castor Oil - Involvement of company and individuals - Denial of cross-examination - Justification of penalties imposed.Analysis:1. The appeals were filed against the imposition of penalties arising from manipulation and irregularities in the export of Castor Oil by a company operating in a Special Economic Zone (SEZ) and Domestic Tariff Area (DTA). The company allegedly exported products by manipulating documents to claim exports to Russia when delivered elsewhere, wrongfully availed DEPB credit, and transferred DTA licenses to importers for customs duty exemption. The Adjudicating Authority confirmed duty demand, interest, and penalties on the company and individuals. The company's appeals were dismissed for non-compliance with a stay order.2. The first appellant, a director of the company, contested the penalties imposed under Sections 112 and 114 of the Customs Act and Central Excise Rules. The appellant argued lack of involvement and highlighted the absence of import of goods, questioning the imposition of penalties. The appellant emphasized that all Castor Oil quantities were exported, negating excise duty liability and penalty under Rule 26 for DTA to SEZ clearance.3. The second appellant, an employee, challenged penalties under Sections 112 and 114 of the Customs Act. The employee claimed acting under the director's instructions, lacking knowledge of irregularities, and not personally benefiting from the actions. Citing relevant legal precedents, the employee argued against penalties, asserting compliance with superiors' directives.4. The Tribunal noted the company's significant duty demand and penalties, observing the alleged evasion and DEPB license misuse orchestrated by the director. The director's pivotal role in exporting goods to a third country as if to Russia, manipulating records, and directing irregularities was established through statements and evidence. The Tribunal found the director to be the mastermind behind the fraudulent activities, justifying the penalties imposed on him.5. Regarding the employee, the Tribunal acknowledged his young age, lack of experience, and compliance with the director's instructions without personal gain. Relying on precedents, the Tribunal concluded that the employee's actions were guided by superiors and lacked personal involvement in the irregularities. Consequently, the Tribunal allowed the employee's appeal while rejecting the director's appeal.6. In summary, the Tribunal upheld penalties against the company and its director for orchestrating fraudulent export practices and DEPB license misuse. However, the Tribunal overturned the penalty imposed on the employee due to his subordinate role, lack of personal benefit, and reliance on superiors' instructions, emphasizing the absence of evidence implicating the employee in the irregularities.